Market Update

The PI had a nice market update and since I’m currently traveling, I figured I’d just point you to their numbers. Some interesting tidbits from my point of view:

Listings for all homes (houses and condos) were up 26.4 percent in the
county and 27.4 percent in Seattle from a year earlier. The increases
were the smallest since January 2007 in the county and December 2006 in
Seattle, suggesting inventory might be starting to level off.

"The entry-level part of the market is much closer to being balanced
than people expect," Crellin said. "That part of the market is probably
not going to see much in the way of price declines."

If I had to make a prediction, based on the numbers I’m seeing and what I’m hearing from buying and selling clients, I’d say we’re likely to see prices bounce around +/- 5% from where they are today.

For sure, buyers who’d been sitting on the sidelines are definitely coming back into the market attracted to the great selection and attractive prices. On the other hand, there’s so much inventory that it’s gonna take a while to see prices appreciate more than low single digit %’s — probably for at least a year.

The biggest wild card is the national economy. If people here keep reading about soaring energy costs, slowing national growth, and real estate contortions all over the country, many Seattle buyers will decide to continue to put off their purchase. On the other hand, if energy costs stabilize, the national economy stops slowing, and the hardest hit markets across the country bottom out, Seattle is definitely positioned to stage a gradual comeback in 2009.

26 Comments

Agree with you that market will most likely go sideways till 2009 but I think it will kick up a bit more than you expect soonafter. I think your assessment might be overly conservative but then again, if I were good at predicting, I’d be running my own hedge fund.

Seems like the Parc will become an even better buy. Just going to their website I see more than 10 units available. Plus there’s a current listing for a unit that’s never been lived in! What’s to say the price won’t drop another 20K during the holidays?

I think Mosler lofts also will see big price drops by the holidays. They have a bunch of listings where they use the same photos for each listing. Seems to me the developer, not individual sellers, are trying to dump them. I’m thinking about this complex too, although I’ve heard people complaining about maintenance problems on this forum. The views of the water aren’t exactly nice either. This place seems a bit overpriced compared to when they broke ground.

Mosler is so bogged down with legal issues that you can’t buy even if you wanted to. I’ve had my eye on that building for some time, but they are seriously overpriced.
I’d like to comment on this idea that buyers are sitting on the sidelines…I think this is delusional. Based on the number of liar loans, piggyback and flippers in Seattle people are not sitting back…the players have left the game and everyone else is sidelined by the lack of easy money. People need to have a downpayment and actually be able to afford their home…a novel idea for many.

Bottom line… Prices will decline a MINIMUM of an additional 16% in Seattle before we see any kind of leveling. That’s the minimum. The realistic outlook is more like an additional 24% drop in prices in Seattle, though.

Wait and watch. That’s all I can really say. Seattle lags the country in economic trends 9 to 12 months. ALL economic indicators are pointing to Seattle housing values following the exact (or close) footprint of other major metropolitan areas on the West Coast have already experienced. Also, two of the most important things to remember is that 1. Markets ALWAYS correct themselves to typically follow housing values to income at a ratio of 2.3 to 1 up to 6 to 1. We are well over 8 to 1 right now in Seattle and it isn’t sustainable. 2. Banks (and this is perhaps the most important factor in the matter)… Banks simply will not lend to people with less than 20% down (some are even requiring 25% down now) with credit scores exceeding 700 (that’s now on the lower side) as they also are returning to “back end” ratios that will not allow individuals to take out non-traditional financing. That translates that non-traditional financing is no longer an option (a factor that substantially contributed to the artificial increases in home values). Additionally, a return to traditional financing and responsible lending practices means a bank is only going to lend around 3 times the salary of an individual, depending on the individual.
If the average person is no longer able to receive 8 or 9 times one’s salary, but instead is only able to obtain 3 to 4 times one’s salary, the average home price and median home prices will go down accordingly.

MD is spot on! Bottom line is that people are no longer to afford houses that they should have NOT afforded 2 or 3 years ago. 20% down is standard, as it has been before this mess started, and people simply are not used to have to do that. I work in a field that interacts with a lot of people who deal in the higher financial structures, and I am telling you people….we are just seeing the begining of this. Hold on to your seats and stop re-arranging the furniture on the Titanic.

What I find so comical about the situation, or “mess” as Dr. Mike refers, is that everyone in the RE world is fighting their hardest to stop a SCIENCE and keep values artificially high. Economics is a science – not a theory. No amount of fighting it can stop it from happening.
All we’re doing here, folks, is returning to a NORMAL market with homes and loans that consumers can truly afford. We’re returning to normality – you know, that place we all once knew just 5 or 6 years ago and when we truly understood the value of the dollar.
In my opinion, the RE Agents and marketers that get on board with this concept and EMBRACE it, instead of fighting it, will be the ones that survive the downward spiral in which we are heading. RE Agents that try to keep prices artificially high will, more than likely, begin to lose out to their competitors that have embraced we are deflating. So, the point is this – RE Agents that actually continue to sell homes because they UNDERSTAND our market and accurately/appropriately sell home will continue to eat. RE Agents that push to keep prices higher are assuradely going to lose out because consumers aren’t going to pay higher prices and CAN’T get approval to pay them even if they were willing. These are the RE Agents that will starve (which are most of them by my estimates).
RE Agents are sales people, most of which do not have backgrounds in economics, banking, lending practices, etc. This is a statistical fact. Although some are great at marketing, its sometimes more difficult for them to understand and accept declining trends – especially after a run of such high home value “appreciation.” Its probably unbelievable, in fact, to many.

Eh, Seattle was a few steps late in the housing game…but that also meant the developers had an idea of what was going on in other cities and stopped building before it got really bad here. They learned from the mistakes of other cities.
Also, Seattle doesn’t have near the number of subprime loans or investors as other west coast cities do.
Seattle will see plus or minus five percent in prices the next year.

Anon, again, propaganda. Seattle as a City is only 500,000 people, so naturally we would have far less in sub prime loans than say LA. All things are relative.
Rachel, 30% in a year? What? When did I say this?

Anon, also, if things are so great in Seattle and we have no reason to decline in value as you would like to elude, please explain the 7% YOY price decline that has happened already. You sound just like an agent or developer as that is the EXACT excuse they love to throw out at their clients. I’ve heard it at least 100 times.

Thanks, D Durn. I’ve read that Case-Shiller index, and its pretty accurate. It fully supports the 7% YOY price decline we’ve seen so far. Also, National City, and authoritative bank for housing values in the U.S. explains Seattle is around 22% over valued last I checked. What is so great about their information is that they have been within 94% of accurate with their projections with all major U.S. metropolitan areas. They update their projections monthly.

I just love reading RE websites. Only they could at the same time, report inventory gains and predict price increases.
The party is over, banks are not giving money to anyone who asks. They now actually expect you to have some form of collateral. Imagine!
At the same time asking for a 20% downpayment.
Guess what that means? Most will not qualify for a loan. If they can’t get the loan to buy overpriced housing, the prices will fall to a place where they can afford. The key word being “fall”.
It is as simple or actually as sad as that!!

I can assure you I am not conversing with anyone, nor is there any dual personality going on here.
Wendy, feel free to check web addresses or IP addresses.
Funny, though, YOU just seemed to pop up out of now where at all 🙂 I’ve never seen your name on ANY blog, in fact. Are you sure you aren’t speaking of yourself when you refer to dual personalities?

Also, its pretty pathetic you would think that only becuase two people have the same view point that it would make it improbable to post those view points. There are two sides to this debate. Are you implying anyone who agrees with me, or anyone I agree with would make us the same person? Puh-lease. Get over yourself.

D Durn writes: “I think Mosler lofts also will see big price drops by the holidays. … The views of the water aren’t exactly nice either.”
The construction of Mosler took away my glimpse of the water, so I can only hope their water views are limited and short-lived. 🙂